U.S. current account and the dollar
By: Olivier Blanchard, Francesco Giavazzi, Filipa Sa.
Contributors: Giavazzi, Francesco.; Sa, Filipa.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 11137.; Working paper series (National Bureau of Economic Research) -- working paper no. 11137.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 36
Subjects: Foreign exchange rates -- Econometric models; Depreciation
Description: "There are two main forces behind the large U.S. current account deficits. First, an increase in the U.S. demand for foreign goods. Second, an increase in the foreign demand for U.S. assets. Both forces have contributed to steadily increasing current account deficits since the mid-1990s. This increase has been accompanied by a real dollar appreciation until late 2001, and a real depreciation since. The depreciation has accelerated recently, raising the questions of whether and how much more is to come, and if so, against which currencies, the euro, the yen, or the renminbi. Our purpose in this paper is to explore these issues. Our theoretical contribution is to develop a simple portfolio model of exchange rate and current account determination, and to use it to interpret the past and explore alternative scenarios for the future. Our practical conclusions are that substantially more depreciation is to come, surely against the yen and the renminbi, and probably against the euro"--National Bureau of Economic Research web site.
Notes: "February 2005."

Includes bibliographical references (p. 35-36).

Also available in PDF from the NBER world wide web site (www.nber.org).